HB 

17/ 

V SUGGESTED PROBLEMS 



.f4«?t- 



FOR TEACHERS 



FOR USE WITH 



ELEMENTARY PRINCIPLES 
OF ECONOMICS 



BY 

IRVING FISHER 

Professor of Political Economy, Yale University 



THE MACMILLAN COMPANY 

LONDON: MACMILLAN & CO., Ltd. 
1912 



By Professor IRVING FISHER 

Elementary Principles 

of Economics 

Cloth, 12mo. $2.00 net 

THE words " Elementary Principles'! in the title of this book indicate the 
limits of its scope ; the book is intended to be elementary, not advanced, 
and concerns itself with economic principles, not their applications. 

First, being elementary, it does not attempt to unravel the most difficult 
tangles, of economic theory or to introduce controversial matter. . . 
Secondly, being devoted to principles, the book is confined to that part or 
aspect of economics which is now coming to be recognized as capable of scien- 
tific treatment in the sense, for instance, in which that term may be applied to 
physics or biology. ... The aim of this book is to formulate some of the 
fundamental principles relating to economics. ... It takes due account 
of those ideas with which the student's mind is already furnished, and builds 
on and transforms these ideas in a manner adapted to the mind containing them. 
This is especially needful where the ideas are apt to be fallacious. The eco- 
nomic ideas most familiar to those first approaching the study of economics 
concern money, — personal pocket money and bank accounts household ex- 
penses and income, the fortunes of the rich. Moreover, these ideas are largely 
fallacious. Therefore, the subject of money is introduced early in the book 
and recurred to continually as each new branch of the study is unfolded. 
For the same reason considerable attention in given to cash accounting, and 
to those fundamental but neglected; principles of economics which underlie 
accounting in general. Every student at first is a natural "mercantilist," and 
every teacher has to cope eventually with the prejudices and misconceptions 
which result from this fact. Yet no textbook has apparently attempted to meet 
these difficulties at the point where they are first encountered, which is at the 
beginning. 



PUBLISHED BY 

THE MACMILLAN COMPANY 

64-66 Fifth Avenue NEW YORK 



SUGGESTED PROBLEMS 
FOR TEACHERS 



FOR USE WITH 



ELEMENTARY PRINCIPLES 
OF ECONOMICS 



BY 

IRVING FISHER 

Professor of Political Economy, Yale University 



Ntto ¥orfe 
THE MACMILLAN COMPANY 

LONDON: MACMILLAN & CO., Ltd. 
1912 



# 



A s 






Copyright 191 2 
By THE MACMILLAN COMPANY 



Set up and printed from type. Published October, 1912 



Press of 

The New Era printing company 

Lancaster. Pa. 



— «. m r\ 



i 



^, 



PREFACE 

These problems aim to test and strengthen the student's 
knowledge of the Elementary Principles of Economics. 
' For this purpose care has been taken to make them as 
definite as possible. The vague problems common to most 
I textbooks have been studiously avoided, in the belief that 
they encourage mere expression of opinion by the student 
instead of an effort at careful and exact thinking. 

The problems may either be assigned in advance, to be 
prepared by the student out of the classroom, or may be 
discussed, without previous preparation, in the classroom. 
I am inclined to think that, in general, the best arrangement 
is to assign, for outside work, the more difficult problems as 
" optionals," giving special credit for their correct solutions, 
and to reserve the simpler problems for impromptu dis- 
cussion in the classroom. By such a discussion it is easy 
to capture the attention and interest of many students 
who would endeavor, out of the classroom, to shirk the 
task of independent thinking. 

For extemporary work I believe the best results will be 
secured by holding the student responsible for the correct 
solution of the simpler problems. They then serve as a 
severe test of knowledge of the text. When the student 
once understands that he must be ready to solve such 
problems at sight he will be stimulated to study the text- 
book not with the object of memorizing the words or reciting 
in a parrot-like way but in order to obtain such a sure grasp 
and mastery of the subject as will enable him to recognize 
and apply the principles involved in the many aspects and 
disguises in which they appear in the problems. 

It was to enable the teacher to give his students such 
" sight work " that these problems were collected in a 
separate pamphlet and not printed in the textbook itself. 

The problems are framed so as to suggest to the teacher 
many other similar ones to be constantly varied and adapted 



IV PREFACE. 

to local circumstances, current topics and particular ques- 
tions introduced from time to time by the students them- 
selves. Blank pages have been provided in order to enable 
the teacher to jot down such additional problems. (I 
should be greatly obliged if teachers would send me such 
new problems, — for instance by lending me their annotated 
copies of this pamphlet.) The pamphlet should thus serve 
as a mere source book or note book, the problems themselves 
being constantly changed and never allowed to become 
stale or stereotyped. This is another reason why a separate 
pamphlet was preferred to problems printed in the textbook 
itself. Such problems soon become stale to the teacher, 
from yearly repetition, and to the student, from loss of 
applicability to current events. They are also apt to lose 
even their character as problems; for their solutions often 
become matters of record in second-hand editions of the 
textbook and in " digests " or " keys " prepared by enter- 
prising students for their fellows. 

I am indebted to various collections of problems, in- 
cluding the late Professor William G. Sumner's Problems 
in Political Economy, New York (Henry Holt), 1888, 
Professor Frank A. Fetter's Principles of Economics, 
New York (The Century Company), 1904, Professor H. J. 
Davenport's Exercises in Value Theory, Chicago (Univer- 
sity of Chicago Press), 1908, Outlines of Economics, by 
members of the Department of Political Economy of the 
University of Chicago (University of Chicago Press), 
1910, and Professor F. M. Taylor's Principles of Economics, 
University of Michigan, Ann Arbor, Michigan, 191 1. I 
have indicated these sources by the initial letters 5, F, D, 
0; T, respectively. 

I am still more indebted for suggestions and criticisms 
to my colleagues: Professor Clive Day and Assistant Pro- 
fessor F. R. Fairchild and to some of my graduate students, 
especially Mr. J. M. Shortliffe, Mr. Alden Anderson and 
Mr. Ray B. Westerfield. Irving Fisher. 

August, 1912. 



SUGGESTED PROBLEMS FOR TEACHERS 



Ch. I. § i 

Is air under ordinary conditions wealth? 

Is the air in a hot house wealth? 

Is the air confined in a diving bell wealth; in one's nostrils; 

lungs; in a pneumatic tire? 
Is the water flowing from a spring by the roadside wealth? 

(T.) 
Is a cup of water taken from the spring wealth? (T.) 
Are fish wealth; all fish? If not, distinguish which are 

and which are not. 
Is a domesticated dog wealth; a wild animal in the jungle; 

in a menagerie? 
Is an autograph of Benjamin Franklin wealth? 
Are the following wealth: an ocean steamship; a ship on the 

bottom of the ocean; gold in a mine; gold in the moon; 

gold, to a shipwrecked sailor on a desert island; gold in 

teeth; false teeth; natural teeth; health; eye-sight; an 

amiable disposition; a waterfall; a head full of useful 

knowledge? (0.) 

Ch. I. § 2 

It is said that many Chinamen come to the United States, 
make money and return to China with it. Do you 
think this tends to impoverish the United States? 

[For other questions on money fallacies see Chapter 
XIV, end.] 

Ch. I. § 3 

Classify, under the scheme of Chapter I, § 3, the following 
articles of wealth: iron ore, Brooklyn Bridge, Yellow- 



2 SUGGESTED PROBLEMS FOR TEACHERS 

stone Park, toll-gate, a city lot, a railway station, track, 
fence, flax, bread, canned goods, play ground, growing 
corn, axe, thread, locomotive, slave, cash-book, money 
metal, money, battleship, baseball. 

Is a serf wealth; an indentured servant; a negro held in 
peonage; a laborer? 

Divide wealth into two classes according to its origin i 
according to its relation to the consumer; according to 
its being traded in; according to durability; according 
to the uses to which it is put; according to its bulk; 
according to its importance to the welfare of a nation; 
according to its age; according to any other principle 
of classification which occurs to you. 

Ch. I. § 4 

With what unit would you measure the following articles 
of wealth: slaves, carpet, gold, diamonds, champagne, 
wheat, wheat land, growing-wheat, plants, horses, oil? 

How would you measure the quantity of wealth in your 
room? Would one unit suffice? If not, how many? 
• Make a rough inventory. If you wished to be very- 
exact, would you need to employ a greater number of 
units? If so, would these units have to be more care- 
fully characterized than in the rough measurement? 

Ch. I. § 5 

How would you attempt to ascertain the price of sugar; 
unclaimed umbrellas left at a railway lost-property 
office; unredeemed diamonds in a pawn shop; building 
land in a city; land in a public park; houses in a row, all 
alike; the White House; sail boats; the Olympic; battle- 
ships? 

If a bicycle is stolen and never recovered, in what sense 
does it belong to the thief? De jure? De facto? If it 
is sold by the thief and bought by an innocent purchaser, 



3 SUGGESTED PROBLEMS FOR TEACHERS 

does it belong to the new owner de jure as well as de 
facto? Do you suppose much of the land and other 
articles of wealth now in existence was, in the course of 
its previous history, stolen or otherwise wrongfully 
acquired? 

Ch. I. § 6 

If a quantity of 243 bushels of wheat is sold at a price of 

#1.10 per bushel, what is the value? 
If an appraiser puts a value of #10,000 on a 250 acre farm, 

what price does this represent? 
If sugar to the value of a dollar's worth is bought at a price 

of seven cents a pound, what is its quantity? 

Ch. I. § 7 

A man died leaving an estate which his adminsitrators 
inventoried at the following valuations: 

Residence '. #10,000 

10 R. R. bonds at $1015 10,150 

Cash 123.16 

Total #20,273.16 

The appraisers say that the residence may be worth a 
thousand or two more or less than the figure (#10,000) 
at which it is entered. The price of the railway bonds is 
known to be correct within #5, while the cash is absolutely 
correct. How accurate is the total, #20,273.16? 

Ch. II. § 1 

What benefit is rendered by a bushel of wheat; a sack 

of flour; a loaf of bread? 
What benefit is rendered by a furnace; a ton of coal; a 
'heating register; a thermostat; a storm window; a 

policeman; a lawyer; a judge; a teacher; a clergyman? 



4 SUGGESTED PROBLEMS FOR TEACHERS 

Ch. II. § 2 

What costs, if any, are there in getting water from a spring? 
What costs at first in getting water from a proposed 
new municipal water system? From this system after 
it is built? What costs to the user of water who draws 
it from a faucet? Any cost to him in money? 

Ch. II. § 3 

Make a diagram to show the interest which a tenant has' 
who has leased a building for five years, occupancy to 
begin six months from date. 

Make a diagram to show the interest which the owner of a 
" season ticket " to the opera has. 

If an ocean steamship company brings an immigrant to 
America under an agreement .by which he is to pay for 
his passage out of future earnings, does the company 
partially own the immigrant? 

What is selling one's self into slavery? If a man is hired 
by the day, how much of a claim has his employer on 
him? How much has he on his employer? 

Benefits are classified as past and future. Why not make 
a third class of " present "? 

Suppose a case where a railway company pays its president 
#200,000 in return for which, without further compen- 
sation, the president agrees to work ten years. To 
what extent does the railway company own the president? 

If, instead, he is paid a salary of #25,000 a year, state the 
claims and counterclaims involved. 

When a professional baseball player is " sold " for a par- 
ticular ball nine, what is the nature of the transaction? 

When a voter sells his vote, to what extent is he owned by 
another? 

Ch. II. § 4 

A buys a typewriter from X, paying cash £100. B rents 
the typewriter from A for one month. During the 



5 SUGGESTED PROBLEMS FOR TEACHERS 

month C occasionally hires the typewriter from B for 
an hour at a time. Explain, using diagram, the property 
right of A, B, and C, each, in the typewriter. 

A buys a ticket for a trip to Europe on the " Olympic." 
What (if any) in this case constitutes wealth; services; 
property; certificate of property right; cost? 

If you buy a ticket to a football game, what property right 
do you acquire? What is its evidence? To what benefits 
does it entitle you? What articles of wealth yield these 
benefits? 

It is sometimes said that a man who promises to deliver 
in the future what does not yet exist, has nothing behind 
his promise. Is this true (a) if he is " good " for his 
promise; (b) if not? Suppose wheat is the wealth in 
which the promissor is to make good his promise. Is it 
the future object, or is it something in the present? 
If so, what? 

In the safes of lower Manhattan are concentrated millions 
of stocks and bonds; does this fact increase the wealth 
of lower Manhattan? By the amount of the stocks' 
and bonds' par value? Market value? By how much 
and why? 

A canal has become inadequate for demands made by traffic. 
Agitation is started for the improvement of the canal. 
A railway corporation, fearing competition if the canal 
is improved, buys it, the purpose being to allow the canal 
to fall into disuse. No income will be derived from the 
canal. In order to raise the necessary funds, a bond issue 
is floated. What is the wealth underlying the bonds? 

Sometimes " subscription books " are subscribed for in 
advance of being published or even written. 

Suppose the subscription is not prepaid, but is to be paid 
on delivery of the book; what claim then has the book 
company on the subscriber? 

In what way, if at all, will the case be different if an agent 
of a magazine secures subscriptions to take the magazine 



6 SUGGESTED PROBLEMS FOR TEACHERS 

and pay for it when the bill is presented. If the promise 
is not written, in what way will the case be different? 
In what way will the case be different if next year the sub- 
scriber refuses to make an absolute promise to renew 
his subscription, but gives assurance that he probably 
will do so? 
In what way will the case be different if no assurance is 
asked, but the publisher of the magazine relies merely 
on past experience and counts on the renewals from three- 
fourths of his subscribers? What is the nature of this 
property-right? If he sells his newspaper, including 
rights to probable renewals, what are these rights called? 
Are they " good will "? 
Show the relation of good will to promises. 

[A similar series of questions may be asked with reference 
to patent rights and other obscure cases of property, 
seemingly independent of wealth. See Nature of 
Capital and Income, Chapter II.] 

Ch. II. § 5 

Classify, the following under wealth, property, certificates, 
services, qualities of wealth, or non-economic elements: 
The overtures performed by an orchestra; the overture 
as a composition (Is it an economic magnitude?); the 
overture as a printed musical score; a baseball game; a 
whiff of fragrance from a buttonhole bouquet ; the ribbon 
of the Legion of Honor; a Ph.D. degree; a union label; 
a trademark; the electric current through a wire; a 
liquor license; political "influence" with a legislature; 
a trade secret; a police permit to pick pockets? What is 
obtained in return for a nickle dropped in the slot of a 
weighing machine? 

Ch. II. § 6 

Suppose a farm worth # 10,000 is mortgaged for #6,000. 
If the mortgage is taxed, ought the farm to be taxed too, 
and if so, how? 



7 SUGGESTED PROBLEMS FOR TEACHERS 

ch. in. § i 

Are wages a stock or a flow? 

Is a moving picture exhibition capital or income? 

Are the films capital or income? 

Ch. III. § 2 

A student owns books worth #100; clothes, #100; furniture, 

#5<>; typewriter, #75; bank account, #200; cash, #25; 

ticket to a ball game, $2. He owes Farmer Jones #30; 

the tailor #40; and the typewriter dealer #35. Make up 

the student's capital account. 
If, immediately after the last balance sheet in Ch. Ill, 

§ 2, is made up, a dividend of 10% (on the original capital) 

is paid, show how the assets and liability items will be 

affected. 

ch. m. § 3 

Make out an imaginary balance sheet for two dates, showing 
a growth of capital-balance and indicating the under- 
valuations in certain specific items of assets to explain 
the discrepancy between the bookkeeper's and the market 
valuation. 

ch. ni. § 4 

Suppose among the assets of a concern is a note for #10,000 
of a bankrupt who can pay only 40 cents on the dollar. 
Show what changes should on this account be made in the 
balance sheet. 

Ch. III. § 5 

Suppose the person whose balance sheet we are considering 
himself fails and can only pay 75 cents on the dollar. 
What effect will this have on the valuation put on his 
debts? Illustrate, by figures, the change produced in 
the balance sheet. 



8 SUGGESTED PROBLEMS FOR TEACHERS 

Ch. III. § 6 

Make up an imaginary balance sheet of a joint stock com- 
pany. What difference, if any, would it make whether 
the company be regarded as consisting of its stock- 
holders or as a fictitious entity owing the stockholders? 

Ch. III. § 7 

Make up the capital account for each of the following 
persons, and combine them by the method of balances 
and by the method of couples: 

(a) Smith owns a farm worth #10,000; cattle and horses, 
etc., #1000; machinery, #1500; buildings and im- 
provements, #5000; railway shares, #500; Brown's 
note, #500. He has given Jones a note for #1000 and 
his farm is mortgaged to the extent of #3000. 

(b) Jones owns goods in a dry goods store worth #25,000; 

house and lot, #10,000; automobile, #2000; bank 
shares ("stock"), #4000; Smith's note, #1000. 
He owes Brown, as per note, #2000; has overdrawn 
his bank account to the extent of #5000; and his 
house and lot are under mortgage for #2000. 

(c) Brown owns a stable worth #5000; horses, #10,000; 
carriages, etc., #15,000; furniture, #2000; Jones' 
note, #2000; stock in a trolley line, #3000; bank 
deposit, #5000. He owes Smith, as per note, #500, 
and his stable is mortgaged for #1000. 

Ch. III. § 8 

Suppose A's balance sheet is as follows: 

Assets Liabilities 

Tangible goods. . . . #10,000 Debts due B #5000 

Shares in U. S. Steel 

Corporation 10,000 

#20,000 #5000 

Capital Balance. . . #15,000 



9 SUGGESTED PROBLEMS FOR TEACHERS 

Do those items imply relations between A and other persons, 
whether real or fictitious? If so, what other persons? 
Make up illustrative accounts of these other persons. 
If these accounts imply relationship with still other 
persons, then make up the sheets of these also and proceed 
until both sides of every debt and credit is represented. 

* Then cancel by the method of couples. Does any debt 
and credit item remain among the uncancelled items? 

Ch. III. § 9 

Does recapitalizing a company at a larger figure (watering 
its stock) add to the wealth of the country? 

Does the issue of #100,000,000 bank notes by banks, by 
which they stipulate to pay that sum on demand, add 
#100,000,000 to the wealth of the country? 

Ch. IV. § 1 

Is the money which a wage earner has been paid and which 
he is carrying home Saturday night capital? Is it 
income? Is it outgo? Is money ever income; outgo? 
What is " money -income "; " money-outgo "? Are 
expenses outgo? Are expenses money or the parting with 



money 



Are the apples on a tree income or capital? Are the apples 
which fall from the tree income or capital? Is the yielding 
of the apples by the tree as the apples fall to the ground 
income or capital? 

Ch. IV. § 2 

Describe the outgo and income of an automobile from the 
time it is bought to the time it is sold second-hand, 
using illustrative figures for each successive year. 

Ch. IV. § 3 

How would these figures be altered if the automobile were 
paid for in installments and when resold were again 
paid for in installments? 



10 SUGGESTED PROBLEMS FOR TEACHERS 

Ch. IV. §§ 4 and 5 

A capitalist receives dividends of #5000 a year which he 
puts, as they come in, into a strong box. Out of it, in 
the course of a year, he takes #4000 for food, clothing, 
etc., and other living expenses. 

Is the receipt of #5000 in dividends income, outgo, or 
capital? If income, income from what? Is the deposit 
of #5000 in the strong box income, outgo, or capital? 
If outgo, outgo occasioned by what? Is the payment 
of #4000 out of the box for living income, outgo, or 
capital? If income, income from what? If outgo, 
outgo occasioned by what? Is the use of the food, clothes, 
house, etc., for which the #4000 is paid income, outgo, 
or capital? If income, income from what? Are the 
contents of the strong box income, outgo, or capital 
the food in the pantry; the clothes worn? 

Ch. V. § 1 

When an apple falls from a tree into the stock of apples on 
the ground beneath; what is the interaction? What 
is the " acting " (i. e., yielding) capital? What is the 
capital acted on? How then credit and debit? Is 
there any net income from the orchard as a whole? 

Express the credits and debits when money is taken out of 
one pocket and put into another. 

Ch. V. § 2 

When water is pumped into a tank what is the interaction? 
What capital is credited? What debited? When coal 
is screened; when wheat is reaped; when potatoes are 
dug; when fish are caught? 

Ch. V. § 3 

Into how many stages may we divide the transportation 
of coal from one city to another? At each stage indicate 
the credits and debits involved. 



II SUGGESTED PROBLEMS FOR TEACHERS 

Trace the interactions — of transfer, transformation, trans- 
portation — connected directly with some article of your 
breakfast table, such as sugar, coffee, meat, eggs, etc., 
following it from the original processes of production to 
its final consumption. 

Ch. V. § 4 

A man enters a store, asks for a dollar's worth of sugar, 
and is handed a package. Thereupon he hands it back 
saying, " I'll change my mind; give me a dollar's worth 
of tea instead." Receiving the tea, he starts to go out 
of the store. The storekeeper calls him back, saying, 
"You didn't pay for the tea." "Oh! yes I did," he 
replies, " I gave you back the sugar." " But," persists 
the storekeeper, " you didn't pa3^ for the sugar." " No," 
replies the man, " but I didn't take the sugar! " Explain 
this " Aim flam " in terms of the debits and credits 
involved. 

Ch. V. § 5 

An exchange consists in four items in all, two of which are 
debits and two of which are credits. Show these four 
items when A buys #10 worth of wheat from B for a note? 
On account? 

A paper " trust " owns great forest lands; cuts its timber; 
floats the logs to pulp mills; and turns them into pulp 
and the pulp into paper. Draw up a table showing the 
chief interactions. 

Ch. V. § 6 

Copy table on page 86 in the center of a large sheet and 
insert other items in the " outgo " column, such as pay- 
ment of wages, rent, interest, etc., and introduce the other 
sides of the interactions thus introduced and the other 
capital items to which they relate. For this purpose 
make other tables on either side of the original. Then 



12 SUGGESTED PROBLEMS FOR TEACHERS 

make the cancellations of interactions by drawing a 
line through each pair of mutually cancelling items and 
note what items are left. 

Ch. V. § 7 

We have seen that it is not correct to infer that in every 
trade the one who parts with the money is a loser and 
only the one who receives it a gainer. Is it correct to 
conclude that neither party gains, since each receives and 
parts with equal values which cancel themselves out? 
If not, is it nevertheless correct to cancel those values 
against each other? 

Suppose the government should compel every mortgage 
to be paid off at once. Make a table showing how the 
balance sheets of the mortgagor and the mortgagee would 
be affected. Would this compulsion bring hardship? 
Would it affect the wealth of the community? How? 

Suppose the government should compel all booksellers to 
stop business. Make income and outgo accounts to 
illustrate the contrast between what would have been 
without such interference and what will happen with such 
interference. Would this compulsion bring hardship? 
Would it affect the income of the community? How? 

Ch. V. § 8 

Add to the account in § 8 of the dry goods company other 
items to include rent paid for hired premises, use of 
one's own premises, payment of interest, wages, etc. 
[See Nature of Capital and Income, p. 160, etc.] 

Ch. V. § 9 

Add to the table in § 9 the items which would be involved 
if we consider " food " as producing an interaction on 
" self " (in the consumption of food) and " self " yielding 
the thus resulting satisfactions. [See Nature of Capital 
and Income, p. 174, ff.] 



13 SUGGESTED PROBLEMS FOR TEACHERS 

Ch. V. §10 

Is dancing labor? Is the dancing of a dancing-master 
labor? If he " would rather dance than eat," is it 
labor? (F.) 

Ch. VI. § i 

Suppose a loan of $100 at 5% for ten years. Show how 
this loan might be expressed in terms of a number of 
separate contracts by which a perpetual annuity is 
bought and sold. Show how it may be expressed in 
terms of ten year-to-year contracts by which a sum of 
money in one year is exchanged for another sum the next 
year. 

Ch. VI. § 2 

What is the amount of #3.00 at 3% for 3 years? 

Assuming the same rate of interest, what is the present 
worth of #200 due in two years? 

Ch. VI. § 3 

Suppose the sum of #52 is due in 1920. Compute its 
" present value " in 1919 if the rate of interest is 4%; 
if the rate is 6%; if 3%. Compute its " present value " 
in 1918 at 4%; at 6%; at 3%. Compute its " present 
value " in 1917 at 4%; at 6%; at 3%. 

Draw a " discount curve " representing the above three 
results. Which curve is the steepest? 

Ch. VI. § 4 

A #1000 " three per cent " bond falls due in two years. 

What is its present value if the actual rate of interest is 

3%; if 6%? 
Draw the tooth-like curves for the above two cases. 

Ch. VI. § 5 

Verify by computation the values given in the last two 
columns of page 125 for the " land " and " the suit of 



14 SUGGESTED PROBLEMS FOR TEACHERS 

clothes " and " the loaf of bread." Carry out the cal- 
culation for " the suit of clothes " more exactly than is 
given in the book. 

Indicate by arithmetical formulae the method of working 
out the same results for the " house " and the " horse.' 

Calculate all the values in the last two columns if the rate 
of interest is zero. 

Ch. VII. § i 

What is the value of a property which yields #100 the first 

year, #200 the second, and #300 the third (and nothing 

more), if interest is 5%? 
What is its value at the end of the first year just before the 

#100 is received? Just after? 
What is its value at the end of the second year before and 

after the #200 is received? The third year in both cases? 
Make a table showing the complete history of its value, its 

appreciation or depreciation, and the interest accrued 

each year. 

Ch. VII. § 2 

Express, by means of formulae, the process of deriving all 
of the figures in the table on page 130 and work it out 
in detail for the " suit of clothes." 

Given interest at 5% and given an income of $i, $ 10, #100 
due respectively 1 year, 2 years, and 3 years from date, 
work out the history of the capital value from the present 
time onward and show each year what is " interest 
accrued," " appreciation " or " depreciation," and " rate 
of income taken out." 

Take as your example a loaf of bread and fill out columns 
of table on page 130. 

Ch. VII. § 3 

The savings of the people of the United States are nearly a 
billion dollars a year. What and where are they? (F.) 



15 SUGGESTED PROBLEMS FOR TEACHERS 

" The old-fashioned notion that capital is built out of 
savings has little or no application under our regime of 
corporate organization. What happens nowadays is 
that the corporation simply puts some portion of its 
huge earnings into improvements such as buildings, 
machinery, side-tracks, etc., so that saving is no longer 
required." 

(a) Show that the modern method as expressed in the 
second sentence involves no essential change in 
procedure. 

(b) Show that this modern procedure may involve, 

probably does involve, not a few cases of really 
onerous saving. ( T.) 

Ch. VII. § 4 

Assuming a rate of interest of five per cent, find what 
annual income in perpetuity is the equivalent of the 
following : 
(i) An immediate payment of #200. 

(2) A payment of #20 a year for ten years and then #400. 

(3) A payment of #1050 one year hence. 

(4) A payment of #300 one hear hence. 

(5) A payment of #300 two years hence. 

(6) A payment of #5 a year for ten years and then #102. 

(7) A payment of #5 a year for ten years and then #98. 

(8) A payment of #50 a year for three years. 

(9) A payment in four successive years of #5, #10, #8, #3. 

Ch. VII. § 5 

A man insures his life for #1000 for a premium of #20 a 
year. Describe the asset and liability thus created for 
the insurance company. Will they be equal to each 
other? What two reasons why the liability is not 
appraised at #1000. We may assume that the rise of 
death increases each year while the premium remains 



16 SUGGESTED PROBLEMS FOR TEACHERS 

at #20, so that the #20 at first more than covers the 
risk. Show what happens, as a consequence, to the 
relative value of the asset and liability as time goes on. 

Ch. VIII. § 2 

If a gold dollar be melted, is it still money? Do you know 
of any times and places in which uncoined gold was 
money? Is a postage stamp money? Is a street railway 
coupon, good for a five cent ride, money? Is the ware- 
house receipt for #100,000 deposited in the vaults of a 
safety deposit company money? Is the "gold certifi- 
cate " of the United States Government (which is 
simply a warehouse receipt for gold coin deposited in 
the vaults of the United States) money? Strictly speak- 
ing, is it the written certificate or the right it represents 
which is money? Is an old Roman coin still money? 

What objections would you see in the use of any of the 
following as money: wheat, diamonds, sulphur, iron, 
ivory, ostrich plumes, lead? 

Ch. VIII. § 3 

In the example given in the text, suppose that the volume 
of money doubles while its velocity and the quantities 
of goods exchanged remain unchanged, but that, through 
some special cause, the price of bread is prevented from 
rising while the price of coal doubles; show what must 
happen to the price of cloth. 

In the same example, suppose that the volume of money is 
doubled and the velocity of circulation increased by 
50%, while the quantities of goods exchanged remain 
unchanged; show what will happen to the price level. 

In the same example, suppose that the quantity of money 
increased 25%, its velocity 20% and the volume of trade 
50%; what will happen to prices? 

From the equation of exchange, show how to express the 
price level; i. e., P = ? 



17 SUGGESTED PROBLEMS FOR TEACHERS 

Ch. VIII. § 5 

Express in algebriac formulae P as an average of the p's 

and T as the sum of the Q's. What kind of an average 

is P? 
Suppose that in the year 1900 the prices of various goods 

are p , p ', po" , . . . and the quantities <2o, <2o', (V\ • • . 

respectively; and that, in the year 1912, the prices and 

quantities are pi, pi, pi', . . . and Qi, Qi, Qi" , . . . 

Let the price level (Po) for 1900 be called 100% or 1. 

Write 

(1) the formula for To, the volume of trade for 1900. 

(2) the formula for 7\, the volume of trade for 1912, as 
the total value which the quantities for 191 2 would 
have at the prices of igoo. 

(3) the formula for Pi, the price level for 191 2. 

[See Purchasing Power of Money, Ch. X and Ap- 
pendix.] 

Ch. IX. § 1 

Suppose one depositor who owes another #5000 gives him 
a note for #5000 and the recipient sells the note to the 
bank for money. What is the effect on the balance 
sheet on page 171? If, instead of taking cash for the 
note, he accepts a credit of #5000, against which he can 
draw at will, what will be the effect on the balance sheet? 

Ch. IX. § 2 

Have the above operations increased the world's wealth 
by #5000? Have they increased the world's currency? 

Ch. IX. §4 

Not many years ago it was estimated that the per capita 
money circulation of England was about #11 while that 
of France was about #51 ; yet there was at least as much 
business per capita carried on in England as in France. 
How could the difference in the amounts of circulating 
medium be explained? (7\) 



1 8 SUGGESTED PROBLEMS FOR TEACHERS 

In the United States in 1909 M was about if billions of 
dollars; M', 6f billions; V, 21 times a year; V, 54. 
Calculate (1) the total money expended; (2) the total 
checks drawn against deposits; (3) the grand total of ex- 
penditures. What then was the total value of the goods 
bought? 

Assume as our unit for measuring the volume of trade ( T) , 
the quantity of goods worth a dollar in iqoq. What is the 
price of each kind of goods? What is the average price 
(P) ? What is the total number of " units " in the volume 
of trade (P)? 

In 1911 M was about 13 billions; M' , 8 billions; V, 21; 
V 50; while T had increased 7%. What, then, was T 
in 191 1. What was P? How much has P changed 
since 1909? On the basis of the above figures how do 
you explain this change in the price level? 

Ch. IX. § 5 

Suppose that in a given community in the course of time 
(by a change in banking laws, or otherwise) the average 
ratio of reserves to deposits subject to check should be 
changed from 20% to 10%. Show the effect on the 
quantity of money in circulation, on the volume of 
deposits and on the price level. Assume that the ratio 
of money in circulation to deposits subject to check 
remains 1 to 5. 

Solve the problem again, assuming that the ratio of money 
to deposits does not remain constant, but changes from 
a ratio of 1 to 5 to a ratio of 1 to 7. 

Ch. X. § 2 

It is shown in the book that the lender loses by depreciation. 
Would he not also lose if instead of " lending his money," 
he should " keep his money "? Show the money fallacy 
lurking in these phrases by distinguishing between keeping 



19 SUGGESTED PROBLEMS FOR TEACHERS 

actual money and " keeping money invested " in land, 
factories, and other wealth. Show the difference between 
" keeping his money invested " in stocks and keeping it 
invested in bonds. 

Ch. XI. 

Suppose the trade unions in the building trades should 
force up the prices of all building materials, buildings, 
and labor in these industries; would they have any in- 
fluence on M, M', V, V, or T? If not, could their 
action have any effect on P? If not, what must be the 
effect on other prices than those which they raise? 

Suppose the steel trust raises the price of steel. Will this 
necessarily raise the general level of prices? Explain. 

In what ways is it possible that the general level of prices 
may be raised by the steel trust? 

Does failure of the wheat crop tend to raise the price of 
wheat? Does it tend to raise the price level? If so, 
in what way? What, if any, connection is there between 
the influence of the crop failure on the price of wheat and 
its influence on the price level? 

What effect does an increase in middlemen have on the 
prices paid by the consumer; on the prices received by 
the producer; on the general level of prices? 

What do you think are the chief effects on prices of shorten- 
ing the hours of labor? 

Trace the effects on the price level of 

(i) The accruing of a surplus in the United States 
Treasury. 

(2) A deficit in the same. 

(3) The admission of new stocks (i. e., of new corpora- 
tions) to the stock exchange. 

(4) Increase in the leisure classes. 

(5) " High living." 

(6) Extension of market. 

(7) Immigration of the Jews. 



20 SUGGESTED PROBLEMS FOR TEACHERS 

(8) Exhaustion of productivity of the soil by unscientific 

farming. 

(9) Abolition of truck system of paying employees. 

(10) The " Black Death," 1348-51. 

(11) Invention of the telegraph. 

(12) Practice of paying money by telegraph. 

(13) Development of business accounting. 

Ch. XII. § 1 

If, instead of duties on imports into the United States, there 
should be laid duties on exports, show what would be 
the effect on the level of prices in the United States? 

If duties were laid on both imports and exports so that the 
net effect on M were nil, what would be the effect on P? 

Suppose that we had a depreciated and irredeemable cur- 
rency so that no money would be either imported or 
exported; what then would be the effect of a protective 
tariff on the general price level? On the prices of im- 
ported articles? On the prices of other articles? 

Ch. XII. § 2 

If a " seigniorage " were reestablished at the mint, what 
would be its effect on the price level and why? 

If the governments should limit the coinage of gold, what 
would be the effect on the price level and why? 

Ch. XII. § 3 

If governments should control the gold mines and reduce 
their output, what would be the effect on the price level 
and why? 

Ch. XII. § 4 

If gold were demonetized, would it retain its full former 
value as bullion? Show mechanically what would 
happen. 



21 SUGGESTED PROBLEMS FOR TEACHERS 

Ch. XIII. § 5 

Suppose, under bimetallism, that gold became exhausted 
while new discoveries of silver were made. Discuss the 
effect on the stability of bimetallism and on the purchas- 
ing power of money. 

Discuss these effects when new discoveries of both metals 
are simultaneously made. 

Ch. XIII. § 6 

It is said that during the Civil War money was abundant 
and yet gold was very dear. Would the expulsion of 
gold by the greenbacks tend to cheapen gold? Reconcile 
your answer with the " dearness " of gold. 

Given the limping standard and falling prices (i. e., an 
increase in the purchasing power of money, i. e., a falling 
level of the surface of the contents of the money reser- 
voirs) how could the government, by exercising its 
discretion in coining silver, tend to arrest the movement? 
If it should continue to pursue this policy in the face of a 
continued fall of prices, what would ultimately happen 
to the amount of gold in circulation? What monetary 
system would result? Would the regulation of the 
purchasing power of money so as to prevent or mitigate 
its changes be economically desirable. Would it be 
politically desirable to allow an official to exercise dis- 
cretion in buying and coining silver. 

Suppose prices to be rising. In what ways could the cur- 
rency be contracted? Discuss their desirability. 

Ch. XIV. § 3 

Write the formula for the simple arithmetical average of 

7 and 8. 
Write the formula for the weighted arithmetical average 

of 7 and 8 when the weights are 2 and 3. 
The simple geometrical average? 



22 SUGGESTED PROBLEMS FOR TEACHERS 

The weighted geometrical average? 

The simple harmonic average? 

The weighted harmonic average? 

Answer the same questions when the numbers to be averaged 
are a and b and their weights A and B. Suppose three 
numbers; four. 

The median of any given series of numbers is the middle 
number, i. e., a number such that half of the given 
numbers are greater and half smaller. If the series 
contains an even number of numbers and the two middle 
ones are not equal to each other, the median is usually- 
taken as their arithmetical mean. 

With these definitions, find the simple averages, arithmetical, 
geometrical, harmonic and median, of I and 2. Find 
the weighted averages when the weights are 3 and 4. 
Work out the same problems when the numbers are 7, 8, 
9, the weights being 1, 2, 3. 

Suppose bread, coal and cloth have the price ratio given on 
page 251 (bottom) in 1909 and 191 2, but that the quan- 
tities exchanged were the same in both years, say 20, 
50 and 30. Show that a properly weighted arithmetical 
average of the index numbers for 191 2 will give exactly 
the same value of FT for 191 2 as 2PQ. Show that 
none of the other averages mentioned (geometrical, etc.) 
would do this. 

What kind of average would you take for the " average 
velocity of circulation of money for the United States " if 
one billion dollars turn over 25 times in the Eastern States; 
a half billion in the Western States, 20 times; and a 
sixth of a billion in the Southern States, 10 times. Show 
what the time of turnover is in the three districts and the 
average time of turnover for the United States. [The 
proper average velocity is a weighted arithmetical average 
and the proper average time is a weighted harmonic 
average.] 



23 SUGGESTED PROBLEMS FOR TEACHERS 

Ch. XIV. 

General Review Problems on Money Fallacies 

" I don't see that society as a whole loses anything by the 
giving of a fireworks exhibition costing #1000. Of course 
the people who pay for the fireworks are just so much 
out. But then the #1000 goes to the other people who 
furnish the fireworks; so that society as a whole comes 
out even." Criticise. (7".) 
" My numerous armies promote the circulation of money, 
and disburse impartially among the provinces the taxes 
paid by the people of the state." Frederick the Great 
justifying his wars in a letter to D'Alembert. (Quoted 
from Bullock.) 

Was there anything in the facts stated to offset the 

sacrifices undergone by the people in paying the taxes? 

(7\) 

A Western newspaper, anxious to hinder the people of the 

community from buying outside, represents a silver 

dollar as appealing to a home dentist about to send it 

to Montgomery Ward & Co. of Chicago, in the following 

strain : 

" Now look here, Doc. If you'll only let me stay in this 
town, I'll circulate around and do you lots of good. 
You buy a big beefsteak with me, and the butcher 
will buy groceries, and the grocer will buy dry goods, 
and the dry goods merchant will pay his doctor bill 
with me, and the doctor will spend me with a farmer 
for oats to feed his buggy horse, and the farmer will 
buy fresh beef from the butcher and the butcher will 
come around to you and get his tooth mended. In 
the long run, you see, I will be more useful to you here 
at home than if you send me away forever." 

(a) Clear up the fundamental errors in all talk of this kind. 

(b) Show, even if we admit the principle implied in the 
quotation (that only the money spent at home can 



24 SUGGESTED PROBLEMS FOR TEACHERS 

complete the circuit so as to get back to the original 

spender), only a very small portion of the dollar 

could get back to the dentist. (T.) 

11 It is sometimes asked whether the raising of a government 

loan to cover ordinary expenditures really causes capital 

to be lost, since the coins received by the government 

remain in existence, — even remain in the country. This 

objection has no weight whatever." Pierson's Principles of 

Economics. 

Show that the statement in italics is correct. (7\) 
The government of the island of Guernsey having no ready 
funds issued paper-notes to pay for the building of a 
market. They circulated and were gradually taken up 
as the market earned its cost, during ten years. When 
they were all redeemed and burned the island had the 
market. Was it free of cost? Explain the nature of 
the transactions involved. (F.) 
" A wise government will never let a dollar in money go 
out of the country; for, as every dollar spent by an in- 
dividual makes him so much poorer, so every dollar 
paid out by the country to other countries makes the 
first country so much the poorer." 

(a) In what sense must the word " spent " be understood 
to make the case of the individual and the country 
parallel? 

(b) When used in this sense, is it true that every dollar 

spent by the individual makes him so much poorer? 

(r.) 

From a Salt Lake supporter of the " Seeing America " 
movement: " We recognize that Americans are annually 
spending #200,000,000 in foreign travel. That practi- 
cally every dollar of this vast sum is lost to the home 
circulation cannot be disputed." 
Criticise the last sentence. (7\) 

" We pay no million dollars per annum for the carrying of 
products between this and foreign countries. Think 



25 SUGGESTED PROBLEMS FOR TEACHERS 

of it. One hundred and ten million dollars in gold coin 
has gone out of the commerce of this country into the 
commerce of other countries. Can New York stand 
this?" James G. Blaine in 1881. 

(a) Is it likely that we permanently lost no million 
dollars in gold from our circulation because we hired 
foreigners to carry our goods? 

(b) Is it likely that we even temporarily parted with that 
much gold on that account? 

(c) Is it likely that as a nation we should have been richer 
if we had done this carrying of products for ourselves? 
(2\) 

" The annual influx of students and other outsiders into 
"the fruit belt to engage in fruit picking and packing is 
an abuse which should be stopped at once. These 
people consume very little, saving their money to take 
back to Chicago and the other places from which they 
came. Thus, while making large sums off us, they give 
little or nothing to the support of our industries." 
Criticise. (T.) 

Ch. XV. § 2 

Why is it that the same kind of shares may be sold si- 
multaneously on the same stock exchange at different 
prices? Could these different prices be widely different? 
Could they be permanently different? Why? 

Ch. XV. § 3 

Are supply and stock on hand the same? Does stock 
include the portion in the hands of consumers? Does 
supply? Can stock ever exceed supply. Can supply 
ever exceed stock? Does it in the case of sales for future 
delivery? (0.) 

Suppose that, as regards a certain kind of rare coin, A 
would buy one at #100; B, one at #90; C and D, one each 
at #80; E, F, and G, one each at #60. If, now, seven are 



26 SUGGESTED PROBLEMS FOR TEACHERS 

to be disposed of in a competitive market, what will the 
price be? Does cost of production affect the situation? 
(0.) 
Frame a demand schedule for salt and for diamonds. 

Ch. XV. § 5 

Draw and discuss supply and demand curves in which 
(a) The demand is elastic and the supply, elastic; 
(&) The demand is elastic and the supply, inelastic; 

(c) The demand is inelastic and the supply, elastic; 

(d) The demand is inelastic and the supply, inelastic; 
by supposing (i) the demand curve and (2) the supply 

curve to shift. 

Ch. XVI. § 1 

Continue the curves in Fig. 30 for higher prices up to #12 
as given in the schedule above it. Continue them still 
further by supposing figures in the schedule for prices 
higher than #12. Continue them, at the other ends, by 
supposing figures in the schedule for prices lower than 
$2, down to zero. What is meant by demand at a zero 
price? Suppose prices below zero and extend the schedule 
and curves for such prices. What is meant by demand at 
such negative prices? 

Ch. XVI. § 2 

Draw up a list of reasons why one person's subjective esti- 
mate of a good may vary from that of another person. 
(0.) 

Ch. XVI. § 5 

Taking the schedule in the book and assuming that the 
market price of coal is #5 per ton, compare the marginal 
desirabilities of coal to the two persons. Do the same 
for a price of #4 per ton; #6. 



27 SUGGESTED PROBLEMS FOR TEACHERS 

Rewrite the price schedules on pages 289 and 290, taking 
as the unit of desirability the desirability of a dollar to 
No. II. Which columns in the two tables will remain 
unchanged? Rewrite the schedules, taking as the unit 
of desirability the desirability of the third ton to No. I 
(and also of course to No. II, since the two are assumed 
to have equal desirabilities of coal). Frame a different 
schedule for No. II, assuming that his desire for coal, 
instead of being always equal to that of No. I (for the 
same quantity), is always twice as intense (but still 
assuming that his desire for a dollar is twice that of 
No. I). Note the resulting similarity in the demand 
schedule. Explain. 

Ch. XVI. § 7 

We know that, although practically all men desire larger 
incomes than they have, some are more easily satisfied 
than others. Contrast the curves indicating their 
marginal desirabilities of money. Which will descend 
fastest? Suppose a curve of marginal desirability of 
money should meet the horizontal or X axis ; what would 
this mean? Suppose a man to have desire only for 
necessary food, clothing and shelter and little desire for 
luxuries. What sort of a curve of marginal desirability 
of money would he have? The curve of marginal de- 
sirability of money above considered expresses the 
relation between the money value of one's income and 
his marginal desirability of money. Could you draw a 
curve to indicate the relation between the money carried 
in one's pocket and his marginal desirability of money? 

Would the latter curve necessarily be of the same form as 
the former? Do either of these curves represent the 
relation between the amount of money in circulation and 
its purchasing power? In which of these three cases is 
the purchasing power of money supposed to remain 
constant and in which to vary? 



28 SUGGESTED PROBLEMS FOR TEACHERS 

" I am not convinced of the soundness of the orthodox 
doctrine that a country can have all the money it wants 
and needs, just as it can have all the engines, machinery* 
etc., which it wants. Money is very different from other 
things. It would be easy to give a man all the food and 
clothes he wants; but, however much money you offered 
him, he would take it all gladly." 

Criticise by distinguishing carefully the three relations 
above mentioned. (T.) 

Ch. XVII. § i 

Extend the first schedule and curve of § I in both directions 
by supposing illustrative figures. 

Ch. XVII. § 2 

Draw rr' and, assuming a particular price, draw mm' 

descending and find the supply of the individual which 

corresponds to that particular price, thus locating one 

particular point in the supply curve. 
Assuming another (say higher) price, reconstruct the entire 

figure and find a second point on the supply curve. 

Will rr' in the second construction be the same as before? 

Will mm'? Will mm' begin at the same point at the left? 

Will it descend more or less rapidly? 
Assuming other prices, obtain the resulting supply curve. 

Ch. XVII. § 8 

Suppose the fixed expenses are #200,000 a year ; the general 
running expenses, #100,000 a year; and the particular 
running expenses, $1 per pair of shoes. What is the 
marginal cost? What is the average cost if the output 
is 1 pair; 100; 1000; 10,000; 100,000; 1,000,000? What 
is the total cost in all these cases? What is the total 
cost if the factory is idle? 



29 SUGGESTED PROBLEMS FOR TEACHERS 

Revise the results by assuming, to be closer to the facts of 
life, that the general running expenses slightly increase 
with an increase in output, while the particular running 
expenses per pair slightly decrease with an increase in 
output. 

Ch. XVII. § 9 

Illustrate graphically " charging what the traffic will 
bear " by assuming a demand curve for mineral waters 
and a monopolist owner of the mineral springs which 
yield this mineral water. Assume first that there is no 
cost of production. 

Show how the results will be modified if there is a cost of 
production, increasing or decreasing. 

Ch. XVIII. § 2 

" If the wheat crop of the world should fall off one-half 
next year, a rise in price would then be of great social 
advantage, in fact, almost indispensable." Explain. 
(7\) 

Ch. XVIII. § 5 

Would a sudden and large increase in the demand for beef 
affect the supply of hides; of shoes; of harness? (0.) 

Ch. XIX. § i 

" The present rise in the cost of living cannot be due to any 
abundance of money; for such abundance would make 
money cheap and it is, as a matter of fact, dear." Criti- 
cise. 

Ch. XX. § 2 

" To-day, all over the land, masons, hod carriers, carpenters, 
and so on, are building palaces which other people are 
to live in. When socialism triumphs, all this will be 
changed. The worker, no longer robbed of the fruits of 



30 SUGGESTED PROBLEMS FOR TEACHERS 

his labor, will himself occupy the palaces he builds, wear 
the broadcloth he makes, and eat the choice viands he 
produces." 

(a) Does justice require that the worker shall have the 
right to consume the particular object which he 
expends effort on? Explain. 

(b) If it did, would the particular set of workers, — masons, 

hod carriers, carpenters, and so on, — who construct 
the palace, have the exclusive right to enjoy it? 
Explain. 

(c) Show that others besides the " workers " here men- 

tioned have supplied conditions necessary to the 
existence of the palace. (7\) 

Ch. XXI. § 3 

Suppose that it were suddenly announced to a poor man 
that he had fallen heir to a large estate and would come 
into possession in one year. What effect would this 
news have on his degree of impatience for income; on 
his desire to borrow? 

Suppose a son who had confidentially expected a large 
bequest from his father discovers when the will is read 
that he has been disinherited. What effects would this 
news have on his valuations of present and future income? 

If under socialism all interest were forbidden, what trans- 
actions would be affected? What do you think would 
be the result? 

Ch. XXIII. § 2 

Suppose all land to be occupied. Would the rent of any 
particular land then necessarily be measured by its 
excess in productivity over the worst land? Would 
there necessarily be any no-rent land ? Are the conditions 
in this example ever or often realized in practice? Con- 
sider, as a case very close to that supposed, a fertile 
alluvial valley bounded by rapidly ascending slopes of 
rapidly diminishing fertility. 



31 SUGGESTED PROBLEMS FOR TEACHERS 

" All land is subject to the law of diminishing returns. 
Consequently every increase in population means that 
the margin of cultivation has to be pushed lower, that the 
food of the masses costs more than before, and so the 
amount of poverty ever increases." 

Objector. " Such talk is all nonsense. There is no law 
of diminishing returns. It costs less to raise a bushel of 
wheat now than it did a hundred years ago. The real 
trouble is that the existence of a right of private property 
in land causes an ever increasing share of the product of 
industry to go to landlords in the shape of rent." 

(a) Explain the meaning of the clause: " the margin of 
cultivation has to be pushed lower." 

(b) Does the fact (supposing it to be a fact) that " it 

costs less to raise a bushel of wheat now than it did 
a hundred years ago " justify the sweeping statement 
that there is no law of diminishing returns? Explain. 

(c) Formulate a proposition which it would justify. 

(d) If there were no law of diminishing returns in some 
sense or other, could any of the product go to the 
landlord as rent? Explain. 

(e) If the law of diminishing returns were not true even 

dynamically, could " an ever increasing share of the 
product of industry go to landlords "? Explain. 
(7\) 

Ch. XXIV. § 3 

" In 1848-49 the black death carried off from one-third 
to one-half of England's workingmen. In consequence 
wages greatly advanced." 

(a) Explain the advance in wages on the basis of the 
Law of Supply and Demand, constructing for the 
purpose imaginary demand and supply schedules. 

(b) Explain the advance in wages on the basis of Marginal 

Utility Principle given above. 

(c) Discuss this statement: "Wages rose because the 

demand for the laborers who were left had greatly 
increased." (T.) 



32 SUGGESTED PROBLEMS FOR TEACHERS 

Would we naturally expect events like the San Francisco 

earthquake and fire to increase the demand for labor 

in general? Explain. (7".) 
" There is just so much work to be done. The entrance of 

women and children into the field of labor must drive 

out an equal amount of adult male labor." 
Criticise. (There are no doubt objections of real weight 

to the extension of child and female labor; but this is 

not one of them.) (T.) 
Why are opera singers so well paid? Spring poets so ill? 

What is the test or measure of skill? (D.) 
Under what conditions could a ditch digger get higher wages 

than a bookkeeper? 

Ch. XXIV. § 4 

Why not raise seals in California and fruit in Alaska? (F.) 

It is often said that the Irishman is a lazy and incapable 

laborer at home, but fairly, even highly, efficient in 

America or Australia. Can you suggest some explanation 

of this? (7\) 

Ch. XXIV. § 5 

" George Rankin is of course a big fool to spend #400 making 
a mill dam in a creek which is dried up every summer and 
never has enough water to run an ice cream freezer; but 
he is doing one good thing, — he is making a whole lot 
more demand for labor and so a lot more employment 
for laborers." 

Explain fallacy. (T.) 

Street comment on a cold snap which bursts numerous 
water-pipes: " Hard on householders, sure enough; but 
no great loss without some small gain. It's a bonanza 
for plumbers." 

Is that sound? (7\) 

" One of the most serious objections to the Chinaman is 
that, even while he stays in this country, he consumes 



33 SUGGESTED PROBLEMS FOR TEACHERS 

mostly commodities which must be imported from China; 
so that his wages go to support, not American, but Chinese 
industries." 

Explain fallacy. (T.) 

Remarks of a leading Congressman when it was announced 
that the Canal Commission would purchase supplies 
wherever they could be secured most cheaply. " The 
President should be able to see the desirability of pur- 
chasing the supplies in this country alone, because thus 
employment would be given to American capital and 
labor instead of foreign." 

Explain fallacy. (T.) 

The Chicago Record- Herald for April 18, 1908, contained 
the report of an interview with the head of one of Amer- 
ica's great universities, wherein various opinions and 
statements were attributed to King Haakon of Norway. 
Among these was the following: " I could black my 
own boots if I wished to; I have done it and therefore 
know how; but if I did what would become of the people 
who make a living blacking boots? " 

Criticise on the basis of Say's law. (7\) 

From Marryatt's Midshipman Easy: 

" Yes, my dear, this is all very well in the abstract, but how 
does it work? " 

" It works well. The luxury, the pampered state, the 
idleness, — if you please, the wickedness of the rich, all 
contribute to the support, the comfort, and the employ- 
ment of the poor. You may behold extravagance, — 
it is a vice ; but that very extravagance circulates money, 
and the vice of one contributes to the happiness of many." 

Criticise. (7".) 

Ch. XXVI. § 3 

" If all the whisky, brandy, gin and other alcoholic drinks 
in existence were taken out and poured on the ground, 
there would not be one whit less wealth or value in the 



T 24 1912, 



34 SUGGESTED PROBLEMS FOR TEACHERS 

world than before the operation." Is this a correct use 
of terms? If not, how would you express the same 
thought? (r.) 

Ch. XXVI. § 5 

Do people sometimes buy a thing at a high price who 
would refuse to buy at a low price? Why? (0.) 

Ch. XXVI. § 6 

Do goods tend to be less valuable when out of style? Why? 
(0.) 



OTHER WORKS 
BY THE SAME AUTHOR 

The Rate of Interest 

ITS NATURE, DETERMINATION AND RELATION 
TO ECONOMIC PHENOMENA. 

Cloth, 442 pages, Index, 8vo, $3; by mail $3.20 

Editorial in Moody' s Magazine, igo8 : 

«< * * * n contains some conclusions of great value to financiers, bankers, 
underwriters, etc. — knowledge that put millions of dollars into the pockets of 
some who possessed it and the lack of which cost others (bond houses, for in- 
stance) more millions. It may be said, in passing, that this recent book is 
easily not only the most complete, but the most valuable treatise in the English 
language on the very important, but little understood, subject of interest rates. 
In fact, it is perhaps both the latest and most scientific discussion of this sub- 
ject in any language." * * * 

The Nature of Capital and Income 

Cloth, 427 pages, 8oo, $3; by mail $3.20 

Marcus C. Knowlton, Chief Justice of Massachusetts : 

"A great book, and analytical, logical and philosophic in a high degree. 
The definitions and statement impressed me as accurate as well as clear, and 
the reasoning is easily followed. It seems to me logically impregnable." 

The late Judge Dill of the Supreme Court of New Jersey stated that "this 
book furnished the long sought for key needed to decide an important law case 
involving millions of dollars of 'capital' and 'income.' Walter Strachan, the 
English law writer, has just published (1910) a book on trust accounts based 
on Prof. Fisher's work." 

A Brief Introduction to the Infinitesimal Calculus 

Revised Edition, Cloth, 84 pages, 1 2mo, $.75; by mail $.80 

The revised edition now includes matter originally prepared for the Ger- 
man, Italian and Japanese editions. The changes include a brief statement of 
the principles of limits, additional examples and answers together with numer- 
ous cases of simplification and explanation. 

Journal of Education. 

" This little volume is admirably adapted to its purpose." 



PUBLISHED BY 

THE MACMILLAN COMPANY 

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LIBRARY OF CONGRESS 



The Purchasing Pow( 

By IRVING FISHER 

Cloth, 12mo. $3.00 net. 

What the Leading Reviewers Say of " The Purchasing 
Power of Money" 

The MANCHESTER GUARDIAN heads its article by Professor S. J. 
Chapman, of Manchester University, with the phrase "A Masterpiece in Eco- 
nomics," and says in part, "Professor Irving Fisher is to be congratulated on 
having successfully carried through the most brilliant piece of economic inves- 
tigation which has been done for some years. . . . He has solved the 
problem which economists have commonly held to be insoluble. The problem 
is to deduce from the known facts of the currency the purchasing power of 
money." 

Of the author's fitness to write upon this subject the GLASGOW 
HERALD comments : " Few economists and statisticians are so well qualified 
for such an undertaking as Professor Fisher, of Yale University, whose earlier 
books on THE NATURE OF CAPITAL AND INCOME and THE RATE 
OF INTEREST stamped him as one of the ablest statistical economists living." 

THE NEW YORK SUN is most impressed, it would seem, by the 
v practical quality of the work. This paper writes : "A notably original and 
suggestive study of the causes which bring about periodic changes in the level 
of prices is contained in THE PURCHASING POWER OF MONEY 
(Macmillan's), by Professor Irving Fisher, of Yale University. The author, 
whose contributions toward the development of the modern theory of value are 
known to economists the world over, applies this theory in the present volume 
to the solution of the problem of finding a remedy for crises and trade 
depressions. ' ' 

THE CHICAGO JOURNAL appreciates that one of the unique and 
most valuable characteristics of the work lies in its determination of the velocity 
of circulation of money. " For the first time in history the velocity of circula- 
tion of money has been statistically determined by means of a method original 
with the author. . . ." 

"Professor Fisher's book is marked, as all his books are, by extreme 
lucidity and brilliance of statement. It is original, suggestive, and, on the 
whole, accurate ; and it supplies a better exposition of monetary theory than 
is available elsewhere." — J. M. Keynes. 2 he Economic Journal, No. 83, 
Vol. XXI, September, igir. 

« THE PURCHASING POWER OF MONEY is a notable achieve- 
ment." — Warren M. Persons. Dartmouth College. Quarterly Publica- 
tions of the American Statistical Association, Vol. XII, December, ign. 



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THE MACMILLAN COMPANY 

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